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1 1 (January 6, 2020)

handle is hein.crs/govbcyu0001 and id is 1 raw text is: FF. ' iE S .r . i , U.S.-Taiwan Trade Relations - mmm, go mppm qq\ , q I aS 11LIANJILiN, Updated January 6, 2020 Taiwan is a developed, dynamic, and competitive economy that is highly dependent on global trade. Taiwan has fared relatively well during the recent U.S.-People's Republic of China (PRC) trade conflict as a key link in global technology supply chains, supplying both U.S. and PRC markets. Looking ahead, Taiwan faces significant constraints as it seeks to overcome domestic challenges (such as labor mismatches and energy shortages), generate new sources of growth in emerging technologies, and diversify away from a growing economic dependence on the PRC. Amidst U.S.-PRC tensions, Taiwan is walking a fine line in trying to remain central to both U.S. and PRC technology markets, including supplying PRC companies like Huawei. Central to Taiwan's ambitions is the Taiwan government's effort to start talks with the United States on a free trade agreement (FTA) in the hope that an FTA might not only increase bilateral trade but potentially open the door to other FTAs and trade diversification for Taiwan. Also see CRS In Focus IF10275, Taiwan: Select Political and Security Issues, by Susan V. Lawrence. Taiwan (population 23.6 million), boasted a nominal gross domestic product (GDP) of $603 billion in October 2019, making it the world's 22nd-largest economy. The World Economic Forum ranked Taiwan as the world's 13th-most competitive economy in 2018, and the World Bank ranked Taiwan the 15th-best economy in ease of doing business. Taiwan's GDP composition by sector is 2% agricultural, 36% industrial, and 62% services. Main industries include electronics, information communications technology (ICT), semiconductors, petrochemicals, textiles, steel, machinery, cement, food processing, autos, and pharmaceuticals. Taiwan's 2018 exports of goods and services totaled $393 billion (equivalent to 67% of GDP), ranking Taiwan as the 2lt-largest trading economy (goods and services). Taiwan's real GDP growth averaged 2.9% from 2009 to 2018; the International Monetary Fund projects that rate to average 2.1% over the next five years. The United States and Taiwan share deep economic ties. Taiwan is the United States' 1 lth-largest merchandise trading partner (total trade valued at $77 billion), 15th- largest export market (at $31 billion), and 13th-largest source of imports (at $46 billion), according to U.S. 2018 data. In 2018, U.S. agricultural exports to Taiwan totaled $3.9 billion and U.S. service exports totaled $10 billion. U.S. trade data understates the importance of Taiwan to the U.S. economy because it does not include production by Taiwan firms that manufacture in the PRC for U.S. export. In 2018, Taiwan firms received $146 billion in U.S. export orders (a 199% increase over 2000); official U.S. data showed $46 billion in Taiwan merchandise exports to the United States. The United States is the largest source of Taiwan's export orders, accounting for 29% of the total in 2018. Taiwan's exports to the United States rose by 21% over the same timeframe, as some PRC-based production shifted to Taiwan to avoid U.S. duties on Chinese imports. Figure I. U.S.-Taiwan Merchandise Trade 2000-2018 ($ in billions) 160 140 8 0 ............. 60 20 .?\ . ......................................... 00 410,~ ~ ~ ~ q,1 -l _e15 .Taiwan U.S. Export Orders (U.S. Imports) ,..US. tmports -U.S. Exports Source: CRS with data from the U.S. Bureau of Economic Analysis and the Taiwan Ministry of Economic Affairs. Note: Data not adjusted for inflation. U.S. foreign direct investment (FDI) stock in Taiwan through 2018 (on a historical-cost basis) totaled $17.5 billion, while Taiwan's FDI stock in the United States totaled $10.6 billion. Taiwan's FDI stock in the United States is higher than official figures indicate, because U.S. data does not include Taiwan investment via free ports that are tax and duty free, such as Hong Kong and the British Virgin Islands. Taiwan runs a trade surplus with the United States and the PRC, and is a top holder of foreign exchange reserves ($474.1 billion as of November 2019), a status that allows Taiwan to stabilize exchange rates, maintain liquidity, and invest domestically and overseas. Taiwan's government has expressed a strong interest in starting FTA talks with the United States, but so far the Trump Administration has been noncommittal. In December 2019, 161 Members of Congress signed a letter asking the U.S. Trade Representative to work toward FTA talks with Taiwan. The American Chamber in Taipei has called on the Taiwan government to remove trade policy irritants and improve prospects for talks, noting in its 2019 White Paper that U.S.-Taiwan relations appear better than in decades. In addition to increasing two-way trade and investment, a U.S.-Taiwan FTA would likely strengthen Taiwan's overall U.S. ties and help diversify Taiwan's commerce away from the PRC, giving other countries cover to resist pressure from Beijing and pursue similar agreements with Taiwan. Taiwan has also reportedly sought FTAs and investment agreements with Australia, the European Union, Japan, and the United Kingdom. K~:>

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